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Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

To: Michael Young who wrote (8276)	5/6/2003 9:01:37 PM
From: Biomaven	Read Replies (2) \| Respond to of 52153

<KOSP> A couple of cautions. Obviously a big chunk of their earnings this quarter was a non-recurring accounting adjustment - as it turned out they effectively stole from last year and applied it to this year. That means the growth rate isn't quite as dramatic as it seems. Second, the growth rate of scripts seems to have slowed some. They claim that Q1 is historically slow for cholesterol drugs, although I'm not sure why that should be so. In general the company has beaten its projections. On the plus side, they of course have the European approval on the horizon, which will also let them recognize some decent milestones as well as nice royalties (I recall 25%) on European sales. Also on the plus side, I think there will be continuing good news flow on the medical studies side - but unfortunately primary care doctors are slow to recognize the importance of HDL, and KOSP just doesn't have the sales muscle to change that. Another negative in the long run is that it is only a matter of time before a big pharma comes up with a "good" drug to increase HDL. By that I mean one that doesn't cause flushing, and expensive to boot. More critical is the patent issue that you raised. Here the crucial patent is their new one, related to the balance between flushing and liver damage. Their old one, relating to giving Niaspan at night to reduce the effect of flushing was pretty silly. The new one looks fairly strong to me, although I certainly haven't done any research on it and have no idea of the prior art etc. Unfortunately they are being challenged by an outfit that wins more of these challenges than it loses. However, the suit was filed before their new patent was granted - conceivably they wouldn't have filed if they'd known about the new patent. Their new patent gives them another 30-month stay I believe - I'm not sure what the situation is with pending patents. So as always, no easy answers. In the low teens I thought the stock was a strong buy - in the mid-20's the case is not quite as compelling, although I think it is still decent. There is a huge short position for some reason - and I very much doubt it's from the warrant/convert holders as those are all Jaharis. Peter